Cartel

The classic competition offence

A cartel replaces competition with conspiracy. Instead of each rival deciding its own prices, output and customers, the members agree them together. The consumer pays more, gets less choice, and loses the innovation that rivalry would have forced. That is why competition law treats cartels as the most serious violation: unlike other agreements, which are judged on their effects, cartels are presumed harmful from the start.

The four forms under Section 3(3)

The Act names four cartel behaviours between enterprises engaged in identical or similar trade. First, directly or indirectly determining purchase or sale prices. Second, limiting or controlling production, supply, markets, technical development, investment or provision of services. Third, sharing markets or sources of production or supply by allocating geographical areas, types of goods or services, or customers. Fourth, bid rigging — directly or indirectly resulting in bid rigging or collusive bidding, which includes practices such as cover bidding, bid suppression, bid rotation and market allocation among bidders. All four are presumed to cause an appreciable adverse effect on competition, though the presumption can be rebutted in principle.

Hub-and-spoke cartels

The Competition (Amendment) Act, 2023 closed an important gap. Earlier, cartel law aimed mainly at agreements between competitors themselves. The Amendment makes clear that a cartel can also operate through a common hub — for instance, a supplier, distributor or platform that coordinates competing businesses, even if the competitors never meet each other. Where competitors use a shared intermediary to align prices or divide markets, the arrangement can now be treated as a cartel. This matters greatly in platform and distribution-heavy markets.

Leniency: the race to confess

Section 46 gives the CCI a powerful detection tool. The first cartel member to make a full, true and vital disclosure about the cartel can receive up to a 100 per cent reduction in penalty; later applicants can receive up to 50 per cent and 30 per cent respectively. The 2023 Amendment added leniency plus: an applicant that discloses a second, separate cartel while cooperating on the first can earn an additional reduction. The system deliberately turns cartel members against each other, because cartels are secretive and hard to detect from outside.

Penalties

For cartels, Section 27 permits a penalty of up to three times the profit for each year of the cartel's continuance, or ten per cent of turnover for each such year, whichever is higher. This is far heavier than the general penalty for other violations, and it is calculated per year the cartel operated. Directors and officers involved in the cartel can also face proceedings. The message is deliberate: the expected cost of cartelising must exceed any profit from it.

Why it matters

Cartels are rarely announced. They appear as suspiciously identical bids, prices that move together without reason, or markets that never seem to overlap. For procurement officers, trade associations and company boards, recognising these patterns — and understanding that even informal understandings, messages or meeting notes can prove a cartel — is essential compliance knowledge. And for any business already inside one, leniency exists precisely because early disclosure is rewarded and late discovery is punished.

Questions readers ask

Does a cartel need a written agreement? No. An understanding, a nod in a meeting, a pattern of messages or a consistent practice of matching bids can all prove a cartel. The CCI looks at conduct and communications, not at formal documents. What if a company says it was pressured into joining? Pressure is not a defence. The lawful exit for a cartel member is disclosure under the leniency programme, not continued participation under protest. Can individuals be proceeded against? Yes. Officers and persons in charge of the companies involved can face proceedings for their role in the cartel, which is why board-level awareness of cartel risk matters.

The position today

Cartel enforcement today rests on three pillars that the 2023 Amendment strengthened: the presumption of AAEC, the leniency programme with leniency plus, and the express coverage of hub-and-spoke coordination. The CCI also uses search and seizure powers — unannounced inspections of business premises — to gather evidence that cartels try to keep hidden. For companies, the lesson of the current regime is that the safest response to discovering cartel involvement is early disclosure, because the first to come forward can escape penalty entirely while those who wait face the heaviest fines.

A warning about trade associations

Trade association meetings deserve special care, because they are one of the most common places where cartels begin. Competitors meeting legitimately to discuss industry standards or policy can drift into sharing prices, output plans, customer lists or bidding intentions, and that drift is enough to create a cartel. Associations should therefore keep written agendas, record minutes, avoid any discussion of prices or markets, and leave the room if a competitor raises a sensitive commercial topic. The association itself can also face proceedings if it becomes a platform for coordination rather than a forum for legitimate industry discussion.